When buying a business, Assignment of remainder lease, do you have to return the tenants deposit during Escrow

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When buying a business, Assignment of remainder lease, do you have to return the tenants deposit during Escrow

Landlord is asking us to put total security deposit of $18,000 but they are transferring $8000 from the previous tenant so we have to come up with another $10,000. Broker for the seller is telling me I have to give the seller his $8000 security deposit back even though it's an assignment of Lease and there is still 3 years left on the current lease they signed. Is this true or current tenant (seller) should forfeit his deposit?

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Answers (6)

This should have been discused well before you got to this point. Honestly, with my "attitude" I would pull the deal. I would argue that the lease is in their name and they should be responsible for that deposit and then get it back when the lease is up. If the landlord wants a deposit from you they should give a lease on your own. This is me though and I can't speak for you. It pisses me off that this wasn't discussed with you at the beginning. Tell the seller you want 8k off the pice of business. Btw, I hate my landlord !!!!!!!!!last btw--- I don't care about how things are normally done in cases like this, look out for yourself, no one else will.

Well, yeah, the landlord is not going to relinquish that. The question is: Do you have to reimburse the seller for that amount, because it was a deposit he had outstanding, and now you get it. (You will get the $8000 when the lease is over). My guess is yes, unless there was something in the lease assignment language that would lead you to believe the seller forfeited the deposit as part of the assignment. Too bad this wasn't addressed ahead of time, to avoid hard feelings.

Broker and attorneys should have thought of this ahead of time, so it was handled without dispute.

That deposit should have been carried on the company's books as an asset. What assets did you buy?

It is a gray area. The asset probably belongs to the seller, unless it was addressed. Otherwise, you would have essentially received an additional $8000 asset that was not addressed, and need to account for that. What does the lease assignment language in your purchase agreement say? Maybe Mr. Cutler (the attorney) can chime in here.

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